AUSTRALIA'S fondness for throwing welfare money at its problems is causing more than just debt - it is also breaking down the family structure, says NSW Finance Minister Dominic Perrottet.

"The well-intended but ham-fisted intervention into social policy by governments is having very real economic consequences," Mr Perrottet told the Centre for Independent Studies.

Mr Perrottet described a controversial US study from 1965 that argued the expansion of welfare programs was directly tied to the disintegration of the nuclear family structure among African Americans.

"(Report author Daniel Patrick) Moynihan was unequivocal in citing the collapse of the nuclear family as the primary reason for black inequality," he said.

"And he was equally direct at laying the blame on government policies where 'marriage was penalised and single parenthood subsidised'.

"In essence, the welfare state was acting as a substitute for the family, crowding out its formation, and increasing rates of divorce.

"This was having a flow on effect of ensnaring lower income families in a poverty trap, from which very few escape."

Mr Perrottet related the report's findings to what was happening in Australia, as seen on Struggle Street - an SBS documentary following the lives of families living in the poorer neighbourhoods of Sydney's Western Suburbs.

"This was also controversial, attacked by some as 'publicly funded poverty porn', and it kicked off a debate about how we treat those at the margins of our society," he said.

"I thought one of the most telling contributions to the debate came from Nick Cater, writing in the Australian, where he revealed that Mt Druitt was once the site of the largest housing project undertaken by the state of NSW.

"Today, one in five of the houses in that suburb of around 12,000 still belong to Housing NSW.

"More than half the tenants are single parents. They outnumber married parents three to one.

"And the vast majority living there receive some kind of social security payments.

"Once again we see the same 'tangle of pathologies' described by Moynihan - delinquency, dysfunction, crime and family breakdown.